The Impact of Organizational Culture, Leadership, and Employee Performance Management on Innovation in the Oil and Gas Industry in the United Arab Emirates

Abstract

The United Arab Emirates (UAE) government’s vision for 2021 revolves around the diversification of the economy. It therefore requires innovation in all sectors of the economy. Innovation may be either radical, changing business models and markets, or incremental, step-by-step improvements in products or processes. The Emirati government has tried to raise awareness of the importance of innovation and developed leadership programs to facilitate innovative practices. One focus is helping leaders understand the value of organizational culture, and how this can affect innovation. There are four main types of culture. Adhocracy is based on the need to boost employee productivity and increase flexibility in the workplace to address external challenges. The goal is to pursue an innovative strategy that increases creativity and fosters continuous improvement. A hierarchical culture focuses on development of routine and discipline in sustaining strict modes of operation. A market culture revolves around the development of strategic processes and policies to align with competitiveness in the business environment. A clan culture emphasizes shared values and goals and builds teams. This type of culture often improves employee development and levels of loyalty. There are also a number of different types of leadership behavior, which may affect innovation. Instrumental leadership supports goal development to achieve control and bolster team spirit. Supportive leadership focuses on development of sustainable relationships between followers and leaders within the organization. The importance of supportive leadership in encouraging innovation is through employee empowerment. It also helps to increase creativity and improve individual accountability. Participative leadership focuses on task execution. It influences innovation by allowing employees to participate in decision-making. Leaders use employee performance management to encourage particular behaviors among employees, such as creativity or innovation. This study empirically investigated the impact of organizational culture on leadership behavior and organizational innovation in the oil and gas industry in the United Arab Emirates (UAE). It is expected to shed light on the important role of the relational dynamics between organizational leadership and organizational culture on organizational innovation within the UAE oil and gas industry and how employee performance management techniques mediate the development and implementation of these innovations. The study hypothesized that there would be a significant positive relationship between leadership behavior or organizational culture, and organizational innovation, mediated by employee performance management. An integrated questionnaire survey was applied to 430 middle management employees in five major oil and gas organizations in the emirate of Abu Dhabi. The survey combined six demographic questions and four validated instruments on organizational culture, perceived leadership behavior, employee performance management and organizational innovation. The study found that organizational culture had a range of effects on innovation in oil and gas organizations in the UAE. Clan and adhocracy cultures both had positive impacts on radical and incremental innovation, but hierarchy and market cultures appeared to have no impact. All leadership behavior types had a positive impact on both radical and incremental innovation. All types of organizational culture apart from hierarchical also had a direct and positive impact on employee performance management. These results suggest that the role of management is crucial in determining the type of innovation in these organizations. Different types of leadership have varied effects on innovation, with participatory and instrumental leadership being the most important. The results also suggest that employee performance management is crucial for any kind of innovation. These findings suggest that it is important to understand the relationships between the study constructs to use them effectively to deliver successful organizational innovations. The capacity to apply innovation as a strategic tool to improve productivity and competitiveness aligns with the level of employee involvement and the leadership styles used. Employee performance management appears to be an essential part of innovative practices in the organizations studied.